April 3 (Bloomberg) -- What do convicted felon Jeffrey Skilling, deposed chief executive officer Stan O'Neal and struggling CEO Jeffrey Peek have in common? They all went to Harvard Business School.

Alumni of the 100-year-old graduate program in Boston have commanded the highest starting salaries among U.S. business school attendees, a 2006 school survey found. More than 500 of them serve as CEOs worldwide, according to data compiled by Bloomberg. Some prominent alumni have ended up disgraced, defeated or with their companies in desperate straits.

``It's obviously a good thing in terms of the reputation, but it's not necessarily going to have a big impact in the long term,'' said Sydney Finkelstein, a professor at Tuck School of Business at Dartmouth, in Hanover, New Hampshire. Finkelstein wrote ``Why Smart Executives Fail'' (Portfolio, 2003).

Skilling, Enron Corp.'s former chief, is serving a 24-year prison term for fraud. O'Neal was ousted by Merrill Lynch & Co. in October after failing to know about mortgage risks that led to the biggest writedowns in the company's history. Peek is seeking to sell CIT Group Inc.'s assets after the lending company's shares dropped 73 percent in the last 12 months.

Harvard Business School, which tied with Stanford University Graduate School of Business as the country's best business school in the latest U.S. News and World Report rankings, has its share of corporate icons: A.G. Lafley, CEO of Procter & Gamble Co.; U.S. Treasury Secretary Henry Paulson, formerly head of Goldman Sachs Group Inc.; Louis Gerstner, who guided International Business Machines Corp. in the 1990s; and Meg Whitman, CEO of EBay Inc.

New TIAA-CREF Chief

Today, former Federal Reserve Governor Roger Ferguson Jr. was named CEO and president of the New York-based Teachers Insurance and Annuity Association, or TIAA-CREF, the largest U.S. retirement-plan manager. Ferguson, who had been head of financial services for Swiss Reinsurance Co., received undergraduate, law and doctoral degrees from Harvard.

New York City Mayor Michael Bloomberg, founder and majority owner of Bloomberg News's parent Bloomberg LP, is a Harvard Business School alumnus, as is U.S. President George W. Bush.

Discerning a school's role in creating leaders who succeed or stumble is difficult, said Warren Bennis, a professor at the Marshall School of Business at the University of Southern California, in Los Angeles.

``We couldn't ever really predict their capacity to grow and learn,'' said Bennis, who is also the co-author of ``Judgment: How Winning Leaders Make Great Calls'' (Portfolio, 2007). Circumstances such as ``an autistic kid, a bad marriage, a bad accident'' can mold executives, he said.

Maturity Issues

Students often embrace the wrong material, Finkelstein said. They disdain ``soft'' courses in organizational behavior, including teamwork, and focus instead on finance and accounting.

``The stuff that most students find the easiest turns out to be the hardest in the real world,'' he said.

O'Neal, known for casting out or demoting Merrill executives who outgrew their usefulness, probably wouldn't have benefited from more time studying interpersonal relations, Bennis said.

``Given his personality, I don't think it would have changed his behavior later on,'' he said, after reading press accounts and observing O'Neal in public meetings.

Harvard Business School's two-year program instills confidence ``to go out and aim high and to think you can work on the world's stage,'' said Scott Snook, an associate professor at the school. Yet, not all students mature psychologically while at Harvard, he said.

Lending Spree

Snook studied 50 students from before they enrolled until they graduated in 2006. Using psychological tests and interviews, he found that one-third were still, in respects, stuck in adolescence, and had trouble empathizing.

Snook found another third inclined to define right or wrong in terms of what everybody else is doing. That might explain why even well-educated executives have fallen prey to the subprime- mortgage debacle, he said. Snook said the study will be published this year.

``They can't really step back and take a critical view,'' he said. ``They're totally defined by others and by the outcomes of what they're doing.''

The subprime-lending spree shows that Harvard and other elite schools fail to mold managers who look beyond self- interest, said Rakesh Khurana, an associate professor at Harvard Business School.

``Business schools as an institution have not effectively addressed this issue of creating a profession that has the capacity for self-regulation,'' said Khurana, author of ``From Higher Aims to Hired Hands'' (Princeton University Press, 2007).

Spitzer, Bush

Randy Barker, a Harvard MBA holder, was replaced as co-head of Citigroup Inc.'s fixed-income division in October after the company's third-quarter profit plunged 60 percent, reflecting bad debts and declines in mortgage values.

Harvard pedigrees other than MBAs also are no guarantee of avoiding trouble. Franklin Raines, a Rhodes Scholar who earned a bachelor's degree and law degree from Harvard, was removed as CEO of Fannie Mae in 2004 after regulators found flaws in the mortgage finance company's accounting.

Another Harvard law graduate, Eliot Spitzer, resigned as governor of New York last month amid allegations he patronized a prostitute. David Schmittlein, dean of the Massachusetts Institute of Technology's Sloan School of Management in Cambridge, said Spitzer's downfall shows the range of personalities that pass through the school.

``Did Harvard kind of help put him into that position? Surely,'' Schmittlein said. ``But it helped put a whole bunch of other people into other positions that are presumably doing quite well.''

Silence on Bush

O'Neal and Peek declined to comment. The warden at the prison holding Skilling didn't respond immediately to a request for access to the former Enron executive, who is appealing his conviction. Raines's lawyer, Kevin Downey, also didn't respond to a request for an interview.

Harvard Business School Dean Jay Light had no comment.

Bush, the first U.S. president with an MBA, has written that Harvard gave him ``the tools and the vocabulary'' of the business world. Now, in his final year in office, Bush faces a slumping economy and an unpopular war. His approval rating is 32 percent, according to USA Today/Gallup Poll research in March.

``Usually, if you've got a sitting president who graduated from your school, you'd talk about it all the time,'' Snook said. With Bush, he said, ``It's almost studiously ignored.''

To contact the reporter on this story: Brian Kladko in Boston at bkladko@bloomberg.net.

Last Updated: April 3, 2008 12:56 EDT